Monday saw some rather wide swings in the indexes but much calmer trading. The close saw the Dow slightly positive and the NASDAQ and S&P slightly negative.
Stock Market Outlook Chart Comments At The Close on Mon Mar 25 2019
The Index now has 6 buy signals in place with the final buy signal was released on Thursday Mar 21 with the 50 day moving back above the 100 and 200 day moving averages.
This had set the S&P up for a return to the bullish pattern of the 21 day, followed by the 50 day, 100 day and then 200 day moving averages.
Fears of a recession though, hit investors hard on Friday and selling fed into more selling. This left behind a large bearish candlestick for Monday which translated into a bit more selling today.
Tuesday though could see more selling than we saw on Monday.
The index closed at the 21 day moving average on Monday and left behind a bearish candlestick.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is positive and falling.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal on Friday March 22 2019. The down signal was confirmed today.
- Settings: For MACD Histogram, I am using the Fast Points set at 13, Slow Points at 26 and Smoothing at 9.
Ultimate Oscillator: The Ultimate Oscillator signal is negative and falling rapidly.
- Settings: The Ultimate Oscillator settings are: Period 1 is 5, Period 2 is 10, Period 3 is 15, Factor 1 is 4, Factor 2 is 2 and Factor 3 is 1. These are not the default settings but are the settings I use with the S&P 500 chart set for 1 to 3 months.
Slow Stochastic: The Slow Stochastic has a down signal in place for Tuesday but is no longer overbought.
- Settings: For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic tries to predict the market direction further out than just one day.
Relative Strength Index: The RSI signal is falling rapidly.
- Settings: The relative strength index is set for a period of 5 which gives it 5 days of market movement to monitor. It is often the first indicator to show an overbought or oversold signal.
Rate of Change: The rate of change signal is falling, indicating that prices should be moving lower again on Tuesday.
- Settings: Rate Of Change is set for a 21 period. This indicator looks back 21 days and compares price action from the past to the present. With the Rate Of Change, prices are rising when signals are positive. Conversely, prices are falling when signals are negative. As an advance rises the Rate Of Change signal should also rise higher, otherwise the rally is suspect. A decline should see the Rate Of Change fall into negative signals. The more negative the signals the stronger the decline.
Support Resistance Levels To Be Aware Of:
2900 is strong resistance
2860 is resistance
2830 is light support
2800 is strong support
2795 is light support
2745 to 2750 is light support
2725 is light support
2700 is light support
2675 is light support
2650 is support
2625 is light support
2600 is support.
There was good support at the 2550 level which is back to being support.
The 2500 level is support.
The S&P has light support at 2480 and better support at 2450.
There is good support at 2425.
Below that there is some support at 2400, 2380, 2350.
2300 has the most support at present but would represent a full correction of 641 points as a drop to this level would be 21% and just 5% away from a full bear market signal ending the bull market from 2009.
Stock Market Outlook for Tomorrow – Tue Mar 26 2019
The technical indicators are all continuing to turn lower. MACD issued a confirmed down signal today. There is also a down signal from the Slow Stochastic to contend with and the remaining indicators are all pointing lower.
We could however see a bounce attempt on Tuesday and then a lower close Wednesday. Whatever happens on Tuesday, the outlook at present has turned back to down and investors should prepare their trade positions for potentially further dips on Tuesday.
That means if stocks move higher Tuesday, I plan to take advantage of the move up to close profitable trades. That way, if Wednesday is lower, I can take advantage of better prices on many positions.
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